International integration, infrastructure and investment in education are the priorities for Uruguay, according to the OECD Multi-dimensional Review

04/03/2016 - The Multi-dimensional Review of Uruguay, comprising an Initial Assessment (Volume 1) and an In-depth Analysis and Recommendations (Volume 2), delivers an assessment and makes recommendations for overcoming constraints on economic and social development. It is presented today by the Director of the OECD Development Centre, Mario Pezzini, in the presence of Uruguay’s Minister of Foreign Affairs, Rodolfo Nin Novoa, and the Minister of Economy and Finance, Danilo Astori.

Volume 1 of the Multi-dimensional Review of Uruguay highlights the remarkable progress achieved by the country over the past decade. Stable macroeconomic policies and a favourable external environment have permitted brisk growth and the financing of effective social policies. The OECD’s analysis of well-being outcomes in Uruguay revealed substantial improvements in several dimensions, especially in areas such as income equality, life satisfaction, environmental quality and trust in the government. However, some challenges remain such as the need for better global integration and international outreach, and adequate provision of human capital and infrastructure.

The second volume of the Multi-dimensional Review of Uruguay explores three main policy areas for future action to put Uruguay on a more sustainable and dynamic development pathway: designing a well-functioning strategy for international integration, overcoming the barriers to infrastructure development, particularly in the transport sector, and strengthening the education and skills systems.

Uruguay has made important progress in its integration into the global economy, participating more actively in global value chains and creating the conditions for attracting foreign investment and boosting productivity. However, further progress could be made in broadening diversification while, at the same time, an inflexible regulatory framework and sub-optimal use of trade agreements are curbing Uruguay’s integration. According to the report, the country should focus on diversifying trade across new markets while introducing greater flexibility into its regulatory profile, especially for its service sector. It is vital to improve regulatory coherence in areas such as competition policy, intellectual property rights and investment if it is to achieve a deep integration into global value chains. At present, even taking the current Mercosur context into account, Uruguay could make better use of the international trade and investment agreements in which it participates.

Moreover, Uruguay needs to tackle the constraints preventing it from improving its infrastructure, particularly in the transport sector. Accordingly, a strategy could be devised to cover the planning, management and operation of networks. A National Transport Plan would be a first step. Planning and prioritisation can be strengthened by improving co-ordination and clarifying responsibilities among the bodies involved in the infrastructure cycle. The roll-out of a PPP (Public-Private Partnership) agenda is heavily reliant on its being effectively integrated into the infrastructure strategy.

The education and skills sector continues to be a priority for Uruguay’s development strategy, given that the shortcomings in secondary education are still significant. Although the provision of basic education in Uruguay is good in terms of access and coverage, challenges persist in terms of the education system’s quality and relevance. Around 30% of Uruguayan firms identify an inadequately educated workforce as a major constraint to their activities, double the rate for OECD countries. Uruguay could improve its support for students in both secondary and tertiary education, starting with improving the methods it uses to identify the more vulnerable students and developing support mechanisms, as well as identifying policies that will bolster the teaching profession, such as autonomy and leadership in schools. In tertiary education, greater mobility within the system and more coherence between programmes are required. Higher education could benefit from the UTEC (Technological University of Uruguay) initiative, which places a focus on involving the business world from the outset so that courses are better aligned with the labour market.

Finally, the report notes the synergies between these three policy areas – integration, transport and education. The composition and quality of human capital will determine Uruguay’s capacity to integrate internationally and develop niches in the service sector.